CONNIVANCE IN EVASION OF GST

[Mr. M. GOVINDARAJAN]

Connivance is the willingness to allow or be secretly involved in an immoral or illegal act.   In taxation matters evasion of tax is there with the connivance of officers and officials of the department and also with other dealers and intermediary persons.  Bogus transactions will be there in this mode.  A chain of people will be involved in such cases.  In GST regime more bogus bills are there and fraudulent availment of input tax credit is witnessed in many cases.  Many registered persons were arrested for such fraudulent availing and utilization of input tax credit.  The amount involved in such cases is very huge and alarming.  The Government has also taken various steps to arrest such activities. 

In ‘SOM NATH VERSUS STATE OF PUNJAB [2020 (12) TMI 937 - PUNJAB & HARYANA HIGH COURT], the petitioner is Assistant Excise and Taxation Officer working at mobile wing, Amritsar.  The Vigilance wing received information that one Som Nath, owner of Sadhu Transport had been indulging in tax evasion in connivance with the officers and officials of Excise and Taxation Department.  There was no checking or verification of the documents or goods of Som Nath.  For this purpose bribes were given to the officers.  The clerk of Som Nath was actively involved in distribution of bribe amounts to various officers and officials of Department.  The mobile numbers used by these persons were traced out.  The technical inputs were collected and it was found that certain officers used to get bribes from Som Nath.   Lesser bribes were given during the COVID period. 

FIR was registered.  In the FIR it was alleged that focus bills were used to transport the goods, the description and the values of goods were changed.  Many officers were included in the FIR.  Apprehending the arrest the petitioner moved under section 438 of Criminal Procedure Code seeking anticipatory bail.  The bail has not been granted to the petitioner in the order dated 11^th September, 2020 under sections 420,465, 467, 468, 471 and 120B of the Indian Penal Code, 1860 and Sections 7, 7(a) and 8 of Prevention of Corruption Act, 1988.

Against the order of rejection of anticipatory bail the petitioner moved to the High Court and filed the present writ petition.  The petitioner put forth the following submissions before the High Court-

• The petitioner has not been named in FIR.
• He was neither apprehended or any recovery made.
• It is due to the disclosure statement of the co-accused who is an Excise and Taxation Officer indicated the name of the petitioner.
• At the time of registration of FIR, i.e., on 17.03.2020, the petitioner was not posted at Mobile Wing, Amritsar.
• He joined mobile wing only on 02.07.2020.
• Earlier he worked at Ferozepur and Fradikot.
• Som Nath and his clerk are in no way related to him.

The State put forth the following submissions before the High Court-

• Twelve officers were named in FIR.
• The petitioner’s name was not included in FIR.
• However his name was disclosed by co-accused Excise and Taxation Officer during investigation.
• During investigation a register, in which the details of officers to whom bribes were distributed, was seized.
• As per the said register the petitioner received a sum of ₹ 5,55,000/- for the period from June 2014 to 13.10.2019 as Excise and Taxation Officer.
• The petitioner received a sum of ₹ 1,00,000/- as Assistant Excise and Taxation Officer, Amritsar during July 2020.
• The files dealt with by the petitioner were inspected to ascertain his role.
• Fifty one files were inspected of roadside checking.
• It was found that the statutory procedure was done away with.
• Number of vehicles detained was let off by levying minor penalties.
• There were no orders for imposing penalties.
• The vehicles were released without ascertaining the origin and destination of the goods.
• The petitioner, in one case, did not physically check and held that full-fledged truck was hired or transporting 70shirts from Ludhiana to Amritsar.
• The petitioner was hand in glove with the passers and the transporters.
• The collection of GST at State level has dropped.
• The evasion of tax in connivance of transporters, officers, officials of Excise and Taxation Department and passer.
• If it is not checked nor taken seriously, the tax regime would crash.
• Therefore the custodial interrogation is necessary to go to the root of the matter.
• The petitioner absented himself from duty and not attending duty.

The petitioner rebutted the contention of the State that the mobile number of the petitioner is not mentioned in FIR and the entries in the register have no evidentiary value.

The High Court heard the arguments submitted by the parties to the petition.  The High Court analyzed the object of GST.  The object of GST is free movement of goods, by removal of barriers and information collection centers.  The responsibility is shifted upon the Excise and taxation officers/officials and more so on the mobile wing of the department.  There is a chain of sellers and purchasers.  There is an inter connection as the purchaser gets the credit of tax paid or suffered by the seller.  The chain can be within the State of PAN India.  One link in the chain being ingenuine, doctored or nonexistent, would impact the entire chain.

The High Court further observed that the present case of evasion of GST requires a deeper probe.  There are far reaching ramifications.  Someone later in the chain in spite of being bona fide purchaser may not award of the earlier misdeed in the chair yet they have to suffer the consequences.  The High Court also observed that the ‘passers’ act as mediators between the dealers, transporters and the officers.  They are responsible to ensure that the goods in transport reach the destination without checking.  For this purpose the dealers, transporters give bribes to various officers.  The passers take care of distributing bribes to the concerned officers/officials of Excise and Taxation Department.

The High Court inferred the consequences of such illegal actions on the part of the dealers, transporters and the officers/officials of taxation department.  If the dealer is sure that the goods sent in transit and the documents accompanying will not be checked or verified, he has leverage of playing havoc with the collection of tax.  The goods can be sent by preparing the documents which are not accounted for and on reaching the destination, the documents are done away with leaving no trail of the transaction.  This enable usage of the credit of the tax paid or suffered on the goods sold in the manner in which is suitable to the commercial interest of the commercial dealer.

The High Court considered the allegations in the present case are very serious.  There is alleged connivance of the transporters, passers and the officials to facilitate the evasion of tax.  The petitioner has been paid a sum of ₹ 5,50,000/-.  The allegations are further linked by the discrepancies found in the file and the way detained vehicles were being dealt with by the petitioner.  Merely the fact that the name of the petitioner does not figure in the telephonic conversion or its transcript and he is not specifically named in the FIR would be a no reason to conclude that custodial investigation is not required.  The contention of the petitioner that he was not posted at Mobile wing, Amritsar on 17.03.2020 is of no avail as the vigilance has considered the details available with it pertaining to last one year. 

The High Court held that there is no quibble that the liberty of a person is of utmost importance but when pitted against a sovereign function i.e., collection of tax which is life blood of economy, the latter would prevail.  Arrest is imperative for fair and full investigation in this case.  The petitioner can use his official influence in tampering the evidence.

The High Court considering the facts of the case held that this case needs a deeper probe and therefore no case is made out for grant of anticipatory bail.